India Restricts Generic Drugs

This spring, India's parliament voted to restrict production of
low-cost generic medicines. Because India is the primary supplier of
inexpensive drugs to the developing world, particularly antibiotics,
cancer therapy, and AIDS drugs, the bill may choke off a vital supply
of medicines to the global poor.

Under India's 1970 Patent Act, Indian companies have been allowed to
produce cheaper versions of a drug as long as they used a different
manufacturing process. Competition from Indian generics has slashed the
price of some drugs by almost 98 percent. In Africa, Indian generics
have reduced the cost of AIDS drugs from $15,000 to $200 per patient
per year. Indian companies also combined a cocktail of medicines into
one simple pill. Aidsmap, a UK based information resource for AIDS
patients and caregivers, estimates that half of all AIDS patients in
the Third World rely on Indian generics.

The bill will change Indian patent law to be more like laws in the
West. Patents will be granted to products instead of processes, and
companies will maintain exclusive rights to any new drug for 20 years.
The change has been anticipated since 1995, when India joined the WTO
on the condition that it agree to eliminate process patents by January
1, 2005.

The new bill still must be signed by the president to go into effect.
The president was the original sponsor of the bill, so Indian and
international ofﬁcials expect the bill to become law soon.

The legislation allows Indian generic drugs currently on the market to
be sold, but manufacturers must pay a royalty to the patent
holder—usually a Western multinational corporation. The bill says this
fee must be “reasonable,” but it does not specify what “reasonable”
means. International standards for royalties hover around 3 to 4
percent,
but Doctors Without Borders reports that GlaxoSmithKline charged a 40
percent royalty in South Africa until activists and courts intervened.

Like patent laws in the West, the new bill contains “compulsory
licensing” clauses, which allow the government power to break patents
in a health emergency. Although 5.1 million Indians are HIV-infected,
the Indian government has not designated HIV/AIDS a national health
emergency.

Theo Smart from Aidsmap writes that, by making it more proﬁtable for
Indian manufacturers to lend their capacities to large Western
pharmaceutical companies than to produce their own drugs, the law may
encourage further outsourcing from the West. According to the New
Delhi-based newspaper Financial Express, more than 30 agreements between Indian and multinational drug companies have already
been signed, including deals with Cipla and Ranbaxy, the two largest
AIDS drug manufacturers in India.